Mitie profit up 10% as energy services boom

Revenue and profit at Mitie have increased 10% as growth in its energy services business has taken off.

This part of the outsourcing company now accounts for 34% of revenue, according to its preliminary results to 31 March 2011. It said that most of its contracts now include some kind of energy management.

The increase in energy prices and the move towards taxes on carbon, means there is more demand

John Telling, Mitie

John Telling, corporate affairs manager, said “The increase in energy prices, and the move towards taxes on carbon, means there is demand.”

The technical facilities management division, which includes energy, grew from £345m in revenue to £437m.

The company is pushing into decentralised energy, including combined heat and power plants and solar PV, Telling said.

He said that Mitie was looking into insulating homes as part of the government’s Green Deal plan to cut the carbon emissions of the residential stock, but said it would have to look at how a scheme targeted at individual homes would work at a “scalable commercial model”.

Mitie’s share price jumped 5% on the day of the announcement, up from 210p a share to 220p.

Guy Hewett, an analyst at Investec Securities, said: “They were in line with analysts’ expectations, but the cash flow was stronger than we thought. They’re on an improving trend.”

He said focusing on energy was an effective strategy: “Energy costs are significant for clients. Plus, some brands have material carbon reduction targets.”

Most revenue growth came through acquisition, including Irish facilities manager Dalkia FM in June last year. This meant the company’s organic growth was just 2.1%, although it grew more than three times the speed in the second half as the first.

Telling said public sector work had not increased this year, despite the hopes of outsourcing companies that government cuts would lead to surge of deals with government.

“Seventy-five per cent of the contracts we won this year are in the private sector, so most of the growth is from there,” he said.

He said it would be up to two years before demand from the public sector took hold.

“The amount of public sector opportunities in the pipeline has increased. In 18-24 months we’ll get back to better conditions.”

Mitie in numbers to year ending 31 March, £m